The Consumer Financial Protection Bureau has launched rules that aim to protect homeowners from abusive mortgage servicers. The Bureau’s guidelines are set to encompass the present high quality lending system being used today.
According to this guideline, lenders are required to gather and verify financial information such as credit history, employment status, debts, income, and assets. Borrowers, on the other hand, are required to meet the minimum amount of assets and income to ensure that they have the capacity to repay their loans.
Under the new guideline, lenders are allowed to analyze a borrower’s capacity to pay for a loan by checking his or her current employment status, mortgage monthly payment, income, and credit history. Other regular payments such as debt obligations and property taxes are considered as well.
For qualified mortgages, borrowers are not required to pay for a minimum down payment. The proposal of having at least twenty percent down payment has been disqualified for the reason that it may hinder potential borrowers and homeowners from purchasing a home.
According to the president of Silicon Valley Association of Realtors, Carolyn Miller, these new guidelines are designed to point the industry into the right direction. It ensures that all mortgages offered to borrowers are fair. It increases trust between the lender and the borrower so that the cause of the recent breakdown of the finance and housing system can be avoided.
The national association also keeps close contact with the Consumer Financial Protection Bureau to monitor the effect of the cap on fees. The goal is to make sure the fees do not restrict mortgages options for the consumers. The guidelines are also designed to ensure that affordable credit remains so that it is accessible to qualified borrowers who have just enough funds to cover for the expenses.
In most cases, people with bad credit loans may find it hard to get the same protection as those who have better credit record. This is why it is best to clear out any debts and other financial bumps before applying for housing loans or mortgages.
The good news though is that this new guidelines signal development in the housing and financial system. The fact that borrowers are now more protected than before is sign for more good things to come. This new development may be a small step in terms of addressing other issues in the economy. However, it is a big step in helping rebuild the housing industry.